Banque du Sud-Est fined Tk 10 lakh for overinvestment in shares
The Bangladesh Bank fined South East Bank 10 lakhs for overinvestment in shares of a single company in violation of the Banking Companies Act.
The bank invested in the shares of the Compagnie Nationale d’Assurance-Vie, exceeding the authorized limit of 25% of its capital.
He bought about 24 lakh shares of National Life Insurance. The price of each company share has been between Tk 210 and Tk 280 over the past year.
In September of this year, the Bangladesh Bank asked the bank to bring its investment back to the authorized limit, but it did not follow the instructions of the central bank. Instead, the banking authorities tactfully moved the share to another account they hold.
In this perspective, the Bangladesh Bank has imposed the financial sanction, according to a letter from a central bank served on the Southeast Bank last month.
At the same time, the bank will be fined 50,000 Tk per day until it adjusts the overinvestment.
When contacted, Mr. Kamal Hossain, managing director of Southeast Bank, said the investment had exceeded the authorized limit due to a rise in the share price.
He also said that they would reduce the investment to the limit.
The bank was sanctioned after the central bank investigated banks’ investments in the stock market and detected the involvement of several banks in breaches of the rules.
Previously, the central bank fined four banks – NRB Bank, NRB Commercial Bank, Exim Bank, and Premier Bank – for breaking the rules about investing in stocks.
Four other banks have been warned against suspending their access to the special liquidity support plan if a new violation is found in the future.
The banks are Eastern Bank, Union Bank, Global Islami Bank and Agrani Bank.
The Dhaka Stock Exchange (DSE) price indexes slowed after the Bangladesh Bank began to take severe action against overexploitation of banks in the stock market.
The average daily turnover of the country’s premier stock exchange fell to Tk 1,000 crore in November from over Tk 2,000 crore in October. The DSEX index fell below 7,000 in November.
The stock market has remained dynamic over the past year, as overall economic activity stagnates. The stock prices of 140 listed companies, mostly small-cap and low-quality companies, have risen 100 to 1,200% in the past year, putting retail investors at risk.
The manipulation of insurance industry stocks has been widely discussed among stock market investors.
The shares of 48 of the 53 publicly traded insurance companies have gained prices between more than 100% and 750% in the past year, according to the DSE.
The prices of junk and small cap stocks have increased unusually without any fundamental reason or improvement in financial health or dividend declaration, reflecting manipulation.
The central bank’s findings indicate that banks are behind the unusual rise in the price of junk stocks over the past year.